If you’ve been following the ERP market lately, you have probably seen SAP’s assertion that companies that run SAP are 32% more profitable than those that don’t. On the other hand, another recent study from The Hackett Group found that there is no correlation between performance and world-class performance.
So what’s the real story? In my opinion, these conflicting statistics suggest two things. First, the ERP market is competitive and cutthroat. Second, it raises the question of whether it is the ERP technology itself or other factors that increases performance.
Based on my experience, the specific ERP tool is just one piece of the business performance puzzle. How you design your business processes, how well you establish KPIs and measure performance, how you design your organization and employee roles, and how well you train employees to use the new system are just a few aspects that can have a huge impact on the success of your ERP implementation.
In addition, I question the validity of both studies mentioned above. For example, the SAP study compared SAP companies to non-SAP companies, not to companies running competing ERP systems. So perhaps a majority of the comparison companies weren’t running any type of ERP package, so it would be expected that the SAP companies would perform higher. But could it be that Oracle or Microsoft customers were 40% or 50% more profitable than the others? Or, could it be that companies that are more profitable choose SAP because they have the resources available to invest in such a large project?
As for the Hackett Group study, I’m not sure what they mean by “world-class performance.” It sounds great, but what does it mean? In addition, their study was focused on the performance of finance organizations within the companies studied rather than the performance of all the functional departments.
However, all of this is not to say that the ERP software itself is not important. Obviously, you want to select software that best fits your business requirements and operational model. But the key is that ERP is simply an enabler, and not the sole reason, of increased business performance.
The main conclusion here is that ERP vendor selection is an important activity. However, it is just one component of successful ERP projects and should be combined with an ERP Business Benefits Realization program to ensure business value and ROI are achieved from the implementation.